Cash Flows and Debt Maturity.

In an asymmetric information framework, a number of authors have demonstrated the existence and uniqueness of short-term debt pooling equilibria in the absence of dissipative costs. The authors show that short-term debt pooling is robust to a broad range of deviations from stationarity and intertemporal independence. However, with intertemporal dependence, separating equilibria exist in which short-term debt signals favorable information. Nonstationarity allows for separating equilibria in which long-term debt signals favorable information. A range of deviations from stationarity and intertemporal independence also support long-term debt pooling equilibria. Copyright 1997 by The London School of Economics and Political Science